The industry of North-East has asked the Centre to do away with the Minimum Alternate Tax (MAT) for industrial units in the region as it was negating the spirit of North East Industrial and Investment Promotion Policy (NEIIPP), 2007 to make the North-East a tax free zone.
The industry if of the view that though on paper the region appears to be a 'tax free zone', the truth is that the industrial units in North-East pay more around 25 per cent of their income as tax in the form of MAT and other levies. "The government has approved for converting the growth centres and Integrated Infrastructure Development (IID) centres into a total tax free zone for the next 10 years. All Industrial activity in these zones would be free from Income tax, excise for a period of 10 years from the commencement of production," stated the first Centre sponsored industrial policy - North East Industrial Policy (NEIP), 1997. The same provision was repeated in the subsequent and revised NEIIPP, 2007.
"Though North-East is a tax free zone as per the provisions of NEIP and NEIIPP, this incentive is not being provided to the industrial units as per the intent in the policy and they are compelled to pay MAT which is nothing but another form of income tax," said RS Joshi, chairman of Federation of Industry and Commerce of North Eastern Region (FINER), the apex industry body of North-East.
He added that the rate of MAT had progressively gone up from 7.50 per cent in 2003-04, when it was first imposed, to more than 20 per cent currently. The ambit of MAT has been further widened in 2012 to include Alternate Minimum Tax (AMT) for non-corporates.
On top of this, Joshi said that various incentives and subsidies like the Transport Subsidy and Excise Duty Refund were being subjected to income tax by treating them as 'other business income' under Section 80IB, 80IC, 80IE of the IT Act. Income tax at the rate of 30 per cent is being levied on these refunds, in spite of MAT being applicable."Thus, the total tax outgo for the industries in the North-East comes to nearly 25 per cent. This effectively dilutes the 100 per cent income tax exemption to just 20 per cent income tax exemption," said Joshi. Soon after the formation of the new government under the leadership of Narendra Modi at the Centre, a FINER delegation met Union industry and commerce minister, Nirmala Sitharaman, and urged her to take up the matter with the Union finance ministry. FINER, in a memorandum submitted to Sitharam, said: ", the industrial units have been facing huge financial loss. The industrial units in North-East should be exempted from payment of MAT. Further, the subsidies and incentives should also not be treated as 'other business income' and should be fully exempted from income tax."
FINER also asked that after the introduction of Direct Tax Code (DTC), the exemptions and benefits that are presently applicable in the current Income Tax (IT) Act, be continued without any dilutions for the units in the North-East.
Similarly, after the introduction of Goods and Service tax (GST), FINER asked that the benefits and exemptions that had been applicable in the current Central Excise regime be continued without any dilutions for the units of the region.
